"Lengthy outages in places such as Nigeria are just the start.
Venezuela remains a key fixture atop our OPEC Watch List and
could potentially be the next shoe to drop in a world ripe with
distressed producing nations," he wrote in a recent note to
clients.

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Capital Markets

"The primary threat to Venezuelan production stems from striking
PDVSA workers walking off the job. And that threat grows by the
day as Venezuela's fiscal situation continues to deteriorate," he
added.

Venezuela has been teetering on the edge of disaster for some
time now as political challenges, security issues, and mounting
debt continue to stress an already tense situation.

Should Venezuela's production get hit, then there would be
several consequences. For starters, this would likely be a
boon for oil prices — similar to what we saw in
recent days after the attacks by Nigerian
militants and the Canadian wildfires.

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Capital Markets

Tran also argues that if production gets hit,
then this could create some winners and losers.

Venezuela, which has been focusing on the
extremely attractive market-share growth in emerging Asia, would
be unlikely to give it up even in this scenario.
Instead, Tran argues that the country
would be willing to sacrifice some US or European market share in
order to keep a grip on emerging Asia.

And should the US lose Venezuelan barrels, then
this could be a boon for Mexico or Canada, which "stand out as
the countries with the most market share to gain in a Venezuelan
export hiccup scenario."

Interestingly, a Morgan Stanley team led by Adam Longson recently
adopted the opposite position, arguing that the threat from
Venezuela is way overblown.

"Extrapolating Venezuela's fiscal and social challenges to
material oil production risk fails to appreciate the conditions
on the ground and various stakeholder incentives," the
team argued.

They continued: "Key risks to production would come from declines
at conventional lighter crude fields, limitations on export
infrastructure, and/or an inability to import diluent — not civil
unrest or fiscal distress — and even here the numbers are not
large."

Venezuela is certainly the big oil producer to keep a close eye
on as the country barrels toward a political and economic
meltdown.